Editor-in- Chief’s Note
Amol Gokhale’s article debates the issues that come to the fore with the proposed new category of products for defence procurement, ‘Indigenously Designed, Developed and Manufactured’; soon to be announced as part of the new Defence Procurement Procedure 2016. Though an initiative that holds out the promise of boosting Indian design and development in the defence sector, operationalising the concept and identifying the Indian content in a product holds out major challenges. Amol Gokhale offers a few solutions that could ease the rolling out of the concept, including one that suggests that the application of the provisions could be delayed, though the policy is announced. What he rules out most emphatically though, is the retraction of the proposed policy with a lot of resistance that it is expected to encounter.
The IDDM Policy Proposal: A Step Forward to Breed Innovation
The DPP 2016 proposes a new category for purchase of defence items viz. IDDM, i.e. ‘Indigenously Designed, Developed and Manufactured’ hardware/software. If implemented, supplies based on indigenous designs will be preferred over others. To be specific, for indigenous designs, only up to 40% by value of the components need to be of indigenous origin, while for others, the minimum indigenous content should be 60% by value. Before going into the aspect of identification the indigenous content of any hardware (especially in terms of value), it may be appreciated that this is the first concrete policy by the government which recognises, in material terms, the value of indigenous designs in defence acquisition.
Spinoffs of Manufacturing based on Indigenous Design
Dhruv
In a world where manufacturing has truly become global, the ownership of design and IPR are the best and most unambiguous proof of ownership. Let us first look at the direct advantages of manufacturing based on indigenous designs. Indigenous designs give you unlimited rights to manufacture, upgrade and innovate further, thus creating new intellectual property. Besides, should a problem arise in the component or system during manufacture or service, it is easier to diagnose and determine the root cause of the problem. There are other indirect advantages of indigenous designs too. For example, it is possible, for indigenously designed systems, to determine expected service life of the manufactured system and estimate extension of life based on service history, property changes if any, damage accumulation as verified by non destructive examination etc. Also, decisions regarding material replacement for the purpose of cost reduction, performance enhancement or inventory rationalisation can be implemented only if design (know-why) of a system or component is understood.
DRDO Bhawan
Indigenous design capability is much more crucial for any country, especially for defence products, as can be understood from the fact that vendors who sell products rarely sell designs, since design is considered to be the investment on which the company earns returns over many years. Thus, parting with the design can adversely affect the company’s future business volumes. In general, the returns on investment in manufacturing are in percentage units while those on intellectual property are in multiples.
Verification Issues of Indigenous Claims
In a globalised economy, it is nearly impossible to be 100 percent correct in identification of products/ components/ materials which are imported, to be able to calculate the value of indigenous content. But it’s also true that a company with some credibility has to keep all records related to their procurements. Thus, a company bidding for, say, a helicopter must have records of their procurement of engine, structures, line replaceable units, controls etc. One can extend the argument and say that the engine manufacturer must be able to furnish details of where the materials, sensors etc., were procured from and where the manufacturing operations were carried out. Although it’s possible to carry this argument to its last detail, it may not be worth doing so as it could be an exercise in futility. Or, one can restrict the scrutiny to two or three levels of subcontracts by the primary firm. Also, rather than looking at import content and subtracting it from the total order value, companies can show their indigenous content and support it with documents. It may be an easier option and will force companies to maintain suitable records.
Arjun
There will be an issue regarding import of common materials/ products/ components, and whether to regard them as imports. Take the example of stainless steel which is used for household kitchenware and in many chemical plants. All stainless steels contain large amounts of chromium and nickel metals, which are imported, because India has no significant deposits of ores containing these elements. Also, many use furnaces of foreign origin and others use presses of international brands as well. Here, items which are commonly imported not just for defence but for overall consumer market need not be branded as import items. Only critical items need to be of indigenous origin. Obviously, an item made in India even using foreign equipment is to be preferred, especially if the technology is indigenous.
Suggested Modalities of IDDM Applicability
It is understood that a foolproof system to clearly arrive at the indigenous content may be an arduous or even impossible task. However, a committee of experts from technical, commercial, financial and legal backgrounds can surely suggest different definitions which are practical, verifiable and which can withstand scrutiny of law. Suggestions from industry forums such as FICCI, CII can also be invited so that there is consensus on the subject. Deterrents can also be introduced which will prevent malicious intentions of certain countries and companies in manipulating the figures to bag orders.
Another suggestion would be to announce the intent of IDDM now, but apply it few years down the line. During these years, companies can be asked to furnish data regarding indigenous content and such data can be examined by a panel to identify possible loopholes or areas of ambiguity in verification of records furnished by companies. All policies are evolutionary, so why shy away in taking the first step?
HAL’s Light Utility Helicopter
From as much of DPP 2016 as has so far been published in the media, it is obvious that innovation will count, creativity will be the way forward and indigenous R&D will hold the key. On its part, the designer community should put its best foot forward and ensure that world class designs are offered and pre-empt sceptics’ view that ‘indigenisation slows modernisation’. But without the IDDM clause, dependence on foreign ideas and designs will continue under the co-called ‘JV Culture’, and wider participation of academia, R&D labs, countless SMEs and bigger companies in defence hardware development will get delayed further, thus hurting the country’s long term self reliance in defence. The temptation to brand the IDDM clause as impractical and, therefore, recommend its withdrawal may be a step backward and a loss of opportunity to breed innovation in defence technology in the country.
Amol A Gokhale
(The author acknowledges many useful discussions with Dr R Balamuralikrishnan, Senior Scientist, DMRL, Hyderabad, Shri M Narayana Rao, former CMD, MIDHANI and other industry leaders)
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of BharatShakti.in)
